Adobe (NASDAQ: ADBE) is fighting tooth and nail to remain relevant in the age of artificial intelligence (AI). Adobe makes digital design software products and systems and has been a celebrated success in Silicon Valley since its founding in San Jose, California, in 1982.
But shares have been falling for more than two years on concerns that new artificial intelligence applications will make the company’s software obsolete or unnecessary. It is down 60% since January 2024 and 27% in 2026.
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Adobe is now in the midst of a leadership transition, looking for a new CEO to help defend the company against a wave of AI-based competitors. Shantanu Narayen has been CEO of the company for 18 years and has led major product development initiatives including Photoshop, Illustrator, Premiere Pro and InDesign.
The company has also sought partnerships to develop its own AI-based products, including one critical of the AI ​​chip manufacturing giant. NVIDIA.
This week, Adobe announced a $25 billion stock buyback program, under which it can buy back shares up to that amount through April 2030. Companies often buy back shares to signal confidence to shareholders and stop a stock’s downward trajectory.
And that’s part of management’s strategy here. In the buyback press release, management wrote, “Our new $25 billion share repurchase authorization is a direct expression of confidence in our strong cash flow and the long-term value we are delivering to investors.”
By reducing the number of shares outstanding, a buyback can also raise the share price and increase earnings per share.
Will it work? Adobe shares rose 3.4% on Wednesday, April 22, a day after the buyback was announced. That’s positive. However, this is the company’s second share buyback in two years. In March 2024, the company announced a $25 billion buyback that is now almost complete. Today, the share price is significantly lower.
The next event to watch out for with Adobe is the release of its second quarter financial results, scheduled for June 11. While Adobe’s revenue and profits have continued to grow at the same rate for a decade, the company will have to convince investors that it is not as vulnerable to AI replacement as some believe. You will also need to demonstrate that you are actively developing a strategy (with new management in place) that gives you added value in an increasingly AI-focused software environment.